Effect of Stock Market Valuations on Foreign Direct Investment in Nigeria

Abstract

This study examines the impact of stock market valuations on foreign direct investment in the Nigerian economy. This was aimed at ascertaining how the development of the Nigerian Stock Exchange has stimulate the inflow of foreign direct investment to Nigerian businesses. Historical data was collated and estimated employing the Ordinary Least Squares (OLS) technique. The empirical results indicate that market capitalization and value of deals in the exchange exert a positive impact on foreign direct investment inflows to Nigeria. Although, further observations indicate that only stock market capitalization exert a statistically significant impact on foreign direct investment inflows to Nigeria. Furthermore, it emerged that all share index is negative and has a statistically valid impact on foreign direct investment inflows in Nigeria. On the basis of the findings of this study, the following recommendations are made: Government should consider the maintenance of prudent macroeconomic policies and also continue to create conducive environment to stimulate the flow of foreign direct investment; Also, there is need to increase citizens’ knowledge and awareness about participation in the stock market through conscious sensitization and education from schools to offices and places of worship.

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